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Liberty Mutual Likely to Appeal AIG Workers Comp Settlement

Source: A.M. Best

Posted on 03 Aug 2011

Despite a U.S. District Court judge giving preliminary written approval to a $450 million settlement, Liberty Mutual is not giving up in its dispute with American International Group Inc. (AIG) over alleged underreporting of workers' compensation premiums.

"We're evaluating our options and in all likelihood will be filing an appeal," Liberty Mutual spokesman John Cusolito said in an email.

On Aug. 1, Judge Robert Gettleman certified the class and gave his approval to the proposed settlement of the lengthy dispute between AIG and other workers' comp insurers.

In his decision, Gettleman noted previous court opinions "describe AIG's alleged decades-long, multibillion-dollar fraudulent underreporting of workers' compensation premiums for the purpose of reducing its share of the residual workers' compensation market -- and consequently increasing the residual market costs of the other members of the National Workers Compensation Reimbursement Pool."

"Given the complex nature of the claims, legal fees are astronomical, and recovery is far from certain. No more detail is required for the court to find at this stage that, compared to the strength of the case, the settlement figure is fair, adequate and reasonable," Gettleman said.

He noted the NWCRP has spent an average of $2 million per month over the past year on this case.

The written decision follows Gettleman speaking from the bench in the U.S. District Court for the Northern District of Illinois July 25 to give preliminary approval of the settlement and certification of the class.

Liberty Mutual Group's two subsidiaries, Ohio Casualty and Safeco, have opposed the settlement.

In his written decision, Gettleman said each class member has been made aware of the developing settlement and the Liberty Mutual's companies' objection to it, "yet none, apart from the objectors, have expressed any concern with the settlement amount or its terms. At this point, the only way to gauge any additional opposition is to solicit it by sending notice of the settlement to the class and inviting its members to voice their opinions."Liberty Mutual can still opt out of the settlement class to pursue a case against AIG on its own.